Strategy Skills - FAQ

What is a SWOT Analysis?
The SWOT analysis is a business analysis technique that your organization can perform for each of its products, services, and markets when deciding on the best way to achieve future growth. The process involves identifying the strengths and weaknesses of the organization, and opportunities and threats present in the market that it operates in.

What definitions are needed for a SWOT Analysis?
The definitions of strengths, weaknesses, opportunities and threats are open to interpretation and a weakness of the SWOT technique is that it can be highly subjective. For example, if your organization was dependent on one single large distributor then this could be seen as a strength, as you would be able to get your products into the market quickly and efficiently. However, it could also be seen as a weakness because you are totally dependent on them to do so.

What is a SWOT internal analysis?
The internal analysis of your organization should include its culture, expertise, resources, and unique qualities within the market place. The extent to which your organization could adapt to changing circumstances is also a factor that needs to be considered.

What is a SWOT external analysis?
External factors include the environment your organization operates in, its market, ecosystem, and all of the third parties involved.

What is matching and converting?
Matching uses competitive advantage to pair strengths with opportunities. Converting means converting weaknesses or threats to strengths or opportunities. Matching and converting are useful ways of looking at the output from the SWOT analysis but both require a lot of debate and analysis rather than instant answers.

What are the advantages and disadvantages of a SWOT Analysis?
The most obvious limitations are: the risks of oversimplification; the fact that vested interests can prevent weaknesses and threats from being acknowledged; and the danger of information overload as there are no obvious limits as to what is and is not relevant.

Is there an example of a SWOT Analysis?
This example uses the international car manufacturer Audi to illustrate how the SWOT analysis can be applied at the organizational level. It is a well-known and popular example that is frequently used to illustrate SWOT in action.

What is an Ansoff Matrix?
The Ansoff Matrix, or Ansoff Box, is a business analysis technique that provides a framework enabling growth opportunities to be identified. It can help you consider the implications of growing the business through existing or new products and in existing or new markets. Each of these growth options draws on both internal and external influences, investigations, and analysis that are then worked into alternative strategies.

What is a market penetration strategy?
Market penetration involves focusing on selling your existing products or services into your existing markets to gain a higher market share. This can be achieved in four ways: maintaining or increasing the market share of current products; securing dominance of growth markets; restructuring a mature market by driving out competitors; or increasing usage by existing customers.

What is a market development strategy?
A market development strategy involves selling your existing products into new markets. There are four strategies that can achieve this: new geographical markets; new product dimensions or packaging; new distribution channels; or the creation of a new market segment by means of different pricing.

What is a product development strategy?
A product development strategy involves developing new products or services for your existing markets. This strategy requires continuous research & development as well as the ongoing assessment of customer needs. There are three broad approaches: the new product is closely associated with current products; it matches current customers' purchasing habits; or it reinvents or refreshes the existing product.

What is a diversification strategy?
A diversification strategy achieves growth by developing new products for completely new markets. Diversification can occur at two levels: either at the business unit level or at an organizational level.

What is a PESTLE Analysis?
A PESTLE Analysis can be used to consider political, economic, social, technological, legal, and environmental issues that may affect your organization. It is often used when launching a new product or service, exploring a new route to market, or selling into a new country or region.

What are the PESTLE Factors?
There are six factors that form the framework of the PESTLE analysis which can be used to help you consider Political, Economic, Social, Technological, Legal, and Environmental issues.

What are the Political Factors of a PESTLE Analysis?
Political factors include government attitudes to employment, consumer protection, the environment, taxation, trade restrictions, and societal reforms, as well as the burden of bureaucracy and the level of corruption.

What are the Economic Factors of a PESTLE Analysis?
Economic factors include assessing potential changes to an economy's inflation rate, taxes, interest rates, exchange rates, trading regulations, and excise duties.

What are the Social Factors of a PESTLE Analysis?
Social factors include age distribution, population growth rate, employment levels, income statistics, education and career trends, and religious beliefs, as well as cultural and social conventions.

What are the Technological Factors of a PESTLE Analysis?
Technological factors can be broadly divided into two areas: manufacture and infrastructure. By exploiting opportunities to update or alter their production an organization can gain market share, thereby attaining a strong competitive advantage.

What are the Legal Factors of a PESTLE Analysis?
Legal factors include current and impending legislation that may affect the industry in areas such as employment, competition, and health and safety.

What are the Environmental Factors of a PESTLE Analysis?
Environmental factors include infrastructure, cyclical weather, disposal of materials, energy availability and cost, and the ecological consequences of production processes.

What are the advantages and disadvantages of a PESTLE Analysis?
To maximize the benefit of the PESTLE Analysis it should be used on a regular basis within an organization to enable the identification of any trends. As with all techniques there are advantages and disadvantages to using it to help plan organizational strategy.

What is the Boston Matrix?
The Boston Matrix is used to allocate resources depending on how a product or service is positioned in the market. It can be used to analyze business units, product lines, and services.

How do I classify products and business units?
Products and business units can be classified as either Stars (tend to be relatively new, have a high market share, and be more or less self-financing), Question Marks (require substantial amounts of cash to try to attain or regain dominance in its growth market), Cash Cows (are a market leader in a stable market that has little potential growth. They generate significantly more cash than is needed to sustain the product), or Dogs (are products that represent a cash drain and are near the end of their product life cycle).

What are Stars within the Boston Matrix?
These are products with a substantial share of a fast-growing market. An organization will usually consider it worthwhile to invest in retaining and growing a star's strong market share because the revenue it brings in equals or exceeds the investment required.

What are Question Marks within the Boston Matrix?
A Question Mark has a low market share in a fast-growing market. Whilst this type of product is likely to generate some revenue it may not be enough to sustain rapid growth and it may become a net consumer of cash as it struggles to retain its market share.

What are Cash Cows within the Boston Matrix?
Successful products or services in mature markets are referred to as Cash Cows. They have high sales revenue, profitability, and market share.

What are Dogs within the Boston Matrix?
Dogs are found in slow-growing or shrinking mature markets and their market share is low. Any revenue they generate is just enough to sustain this low market share and from the organizational perspective they represent a drain on its resources because even though they may be 'breaking even' financially, they are using assets (people and capital) that could be better used to support a Question Mark or Star.

Can I use the Boston Matrix at brand level?
The Boston Matrix can help to optimize the distribution of funds across business units or product ranges. It is often used at the brand level, although it was never designed to be.

What is a balanced portfolio within the Boston Matrix?
A balanced product portfolio has Cash Cows that can provide the investment funds to develop Question Marks and Stars. Once a balanced portfolio has been defined, there are four strategies that can be followed: Hold, Build, Harvest, or Divest. A balanced portfolio does NOT mean having equal numbers of products or services in each quadrant.

What are the advantages and disadvantages of the Boston Matrix?
Any organization using the Boston Matrix to help define its strategy, rather than just provide an indication of future potential, must properly represent the cash flow of each business unit or product being assessed. There has been a tendency for users to oversimplify the analysis and to focus on categorizing products or business units as Cash Cows, Stars, Question Marks, or Dogs, rather than considering cash flow.

What is Porter's Five Forces Analysis?
Porter's Five Forces model is regarded as a credible and practical alternative to the widely used SWOT Analysis. The five key factors the model uses to identify and evaluate potential opportunities and risks are: competitive rivalry, threat of new entrants, threat of substitutes, bargaining power of suppliers, and bargaining power of customers.

What is Competitive Rivalry in Porter's Five Forces Analysis?
One of the keys to success for organizations is their ability to understand their competitors' actions and marketing strategies. The degree to which rivalry exists among competitors varies between industries and the market sectors within them. Regardless of the number of key competitors your organization faces it is vital for its longevity that you understand the differences between your rivals.

What is the Threat of New Entrants in Porter's Five Forces Analysis?
The number of potential new entrants into a market varies considerably and is a key factor you need to quantify. Sectors that require high levels of investment and expertise are much harder for new organizations to break into and challenge the existing providers, which protects the profit levels of the existing players.

What is the Threat of Substitutes in Porter's Five Forces Analysis?
'Threat of substitutes' means the availability of a product that the consumer can purchase instead of the industry's product. The availability of close substitute products can make an industry more competitive and decrease profit potential for the firms in the industry. It shapes the competitive structure of an industry and influences an organization's ability to achieve profitability.

What is the Bargaining Power of Suppliers in Porter's Five Forces Analysis?
Any organization needs raw materials and this creates buyer-seller relationships between the market and the suppliers. The distribution of power within such relationships varies, but if it lies with the supplier then they can use this influence to dictate prices and availability. You need to assess the balance of power within your own market as part of using Porter's model.

What is the Bargaining Power of Customers in Porter's Five Forces Analysis?
Customers also have significant bargaining power in markets where it is easy for them to transfer between different products without suffering any transfer costs. A good example of this is the washing powder market, which without brand loyalty has no financial impact if you swap between products. This power decreases if the customer has to spend more time or effort in switching between products or services.

What are the advantages and disadvantages of Porter's Five Forces Analysis?
Porters Five Forces model was developed in an environment that was quite different to the one organizations find themselves operating in today. The followings considerations should be kept in mind when using the model: the pace of change is now more rapid, market structures were seen as relatively static, the model provides you with only a snapshot of your environment, it can be difficult to define the industry, the model does not consider non-market forces, it is most applicable for analysis of simple market structures, the model is based on the idea of competition.

What is the McKinsey 7-S Model?
The McKinsey 7-S Model is a tool designed to help business owners and managers understand how aligned their organization is, and where it can be approved. As you might guess from the title, there are seven elements which make up this model – strategy, structure, systems, shared values, skills, style, and staff. Each of these elements it vital to your success, yet each needs its own time and attention to function properly. Only when these separate parts of your organization are able to come together can you be confident that you are on the right path.

What are Context Diagrams?
A context diagram (SCD) defines the boundary between the system, or part of a system, and its environment, showing the entities that interact with it. They represent a high level view of a system and are used early in a project to get agreement on the scope.

What is a Balanced Business Scorecard?
The balanced scorecard is a strategic planning and management system that is used to align business activities to the vision and strategy of the organization, improve internal and external communications, and monitor organization performance against strategic goals.

What is the Four-View Model?
While the Four-View Model is more commonly referenced when it comes to software development and engineering, the principles certainly apply to the operation of any organization.

What are Entity Relationship Diagrams?
These are data models for describing the data or information aspects of a business domain or its process requirements, in an abstract way that lends itself to ultimately being implemented in a database such as a relational database.

What are Business Process Models?
these represent the processes of an enterprise, so that they may be analyzed or improved. BPM is typically performed by business analysts, who provide expertise in the modeling discipline; by subject matter experts, who have specialized knowledge of the processes being modeled; or more commonly by a team comprising both.

What is a Stakeholder Wheel?
This is a technique that helps to identify stakeholders. It can be used to cross check your already created stakeholder list against the generic stakeholder groups to identify any missing ones.

What is a Power Interest Grid?
The Power/Interest Grid contains four quadrants: high power/high interest, high power/low interest, low power/high interest, and low power/low interest.
Each quadrant gives you an indication of the level of stakeholder management that you’ll have to employ and may also influence the type of communication style.

What is a Resource Audit?
The resource audit identifies the resources available to a business.
Some of these may be owned (e.g. plant and machinery, trademarks, retail outlets) whereas others can be obtained through partnerships, joint ventures or suppliers.

What is a MOST Analysis?
MOST Analysis is a simple framework tool for analysing or planning the detail of what an organisation does. It helps you frame questions, starting from the high-level mission of the organisation and digging right down to the detail of individual tactics. MOST stands for: Mission, Objectives, Strategy and Tactics.